2008 (2) TMI 372 - HC - Wealth-tax

Land purchased on which party constructed building existed which was not usable land is an asset assessable to wealth tax u/s 40(3)(v) - held that section 40(3)(v) will not apply to any unused land held by the assessee for construction of hotel for a period of two years from the date of acquisition land is exempted from tax only for period of 2 years from date of acquisition - matter is remanded to AO for determining the value of the land and thereafter to pass appropriate order

Summary

Issues:
1. Whether the Tribunal erred in confirming the deletion of the addition of Rs.1,56,00,000 to the net wealth of the assessee for an under-construction property.
2. Whether the Tribunal erred in confirming the deletion of the addition of Rs.26,04,413 to the net wealth of the assessee for secured debts.

Analysis:

Issue 1:
The court noted that the Assessing Officer allowed the deduction of the entire loan taken from the Bank of Tokyo after making additions to the net wealth. The court considered the first question regarding the under-construction property. The Commissioner (Appeals) had earlier held that the property, being a business asset, is exempt from tax and its value cannot be included in the wealth computation. The Revenue's appeal against this decision was allowed, but the subsequent orders were passed with discrepancies in dates. The Income-tax Appellate Tribunal, citing precedents, held that work in progress cannot be treated as an asset. The court analyzed the relevant sections of the Finance Act 1983 and concluded that the property, as it was not usable, should be assessed for wealth tax. The Tribunal's order was set aside, and the matter was remanded to the Assessing Officer for valuation. The Commissioner's direction to refer the valuation to the Valuation Officer was reiterated.

Issue 2:
Regarding the second question on the deletion of the addition for secured debts, the court found it to be purely academic as the Assessing Officer had already allowed the deduction of the entire loan amount. Hence, this question did not require an answer. The court focused on the first issue related to the under-construction property and provided a detailed analysis based on the provisions of the law and the factual circumstances of the case. The decision was made to remand the matter for proper valuation and assessment, emphasizing compliance with the Commissioner's directions for valuation.

In conclusion, the judgment addressed the issues raised by the Revenue regarding the deletion of additions to the net wealth of the assessee. The court's analysis of the relevant legal provisions and factual considerations led to the decision to set aside the Tribunal's order and remand the matter for proper valuation and assessment by the Assessing Officer.